Renters in Canada Face Toughest Market in Decades Amid Surging Demand, High Prices: CMHC

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Renters in Canada are facing the toughest market in decades as surging demand and high prices meet some of the lowest national vacancy rates in decades, according to the Canada Mortgage and Housing Corporation (CMHC).

The national average vacancy rate for purpose-built rental apartments declined to 1.9 percent last year—the lowest level since 2001, the housing agency said in its latest rental market report, released Jan. 26.

Across the country, in the purpose-built rental market, the average two-bedroom rent was up 5.6 percent, to $1,258, while the vacancy rate slipped down from 3.1 percent in 2021 to 1.9 percent.

The report found the demand for purpose-built rental apartments increased in 2022, while the vacancy rate decreased. Demand outpaced supply in 2022, dropping the open vacancies lower than they were in 2021.

The condo apartment market, meanwhile, saw the average rent for a two-bedroom apartment hit $1,930, with a national vacancy rate of 1.6 percent.

Particularly in Montréal, Vancouver, and Toronto, low vacancies, surging demand, and higher net migration, are making it harder for renters to find a place to live, and even more difficult to actually purchase a new home, according to the CMHC’s latest Rental Market Report.

The annual report uses data from CMHC’s fall 2022 Rental Market Survey and Condominium Apartment Survey.

“Lower vacancy rates and rising rents were a common theme across Canada in 2022,” said Bob Dugan, CMHC’s chief economist, in a Jan. 26 news release.

In most markets, especially Ontario and B.C., the report notes that the share of rental units available and affordable for the lowest-income renters is either “in the low single digits, or too low to report.”

CMHC said that rental affordability “continues to pose a significant challenge across the country“ and that there is a lack of affordable rental housing, ”especially for the lowest 20 percent of income earners,“ which it attributes to ”very low stocks of rental units that are affordable for people in lower income ranges.”

CMHC defines an affordable dwelling as one where the renter household is spending no more than 30 percent of its gross income on rent.

In January, the federal government offered qualifying low-income renters a one-time $500 payment under the Canada Housing Benefit, to help with the cost of renting. To qualify, individuals have to be over the age of 15, with a net adjusted family income of $35,000 or less for families, and $20,000 or less for individuals.

Low Stock

The report indicated that in 2022, rental condominiums accounted for 19.3% of the total stock of rental units across large cities. In Vancouver, Calgary, and Toronto, more than one-third of all rental supply is rental condominiums.

The demand for rental housing was driven in part by higher net migration, increased costs for home ownership, and students returning to on-campus learning who need rentals near their post-secondary institutions.

The average rent growth for two-bedroom units that were being rented to a new tenant was well above average rent growth for units without turnover (18.2% vs. 2.8%).

“This reflects the fact that, once a tenant vacates a unit, landlords are generally free to increase asking rents to current market levels. Landlords can also take the opportunity to renovate between tenants. In doing so, they raise unit quality and can then ask for higher rents from new tenants,” says the report.

Vancouver saw a “record-high increase,” in rental demand, as did Toronto.

“This reflects higher flows of immigrants to these centres, among other factors,” said the report.

The average monthly rents for two-bedroom purpose-built apartments in Vancouver ($2,002) and Toronto ($1,779) continue to be the highest in the country, well above the national average of $1,258, indicated the report.